It's The Most Ironic Thing - Lib Dems & Tuition Fees

Now that Parliament has dissolved to make way for the general election, we are about to enter a period of time when the Liberal Democrats will lose many of their MPs. One thing I find quite ironic is that the main Lib Dem legacy will be the little matter of reneging on the promised scrapping of tuition fees. I say ironic, because the scrapping of tuition fees was a completely ludicrous idea, and one that in not being delivered is probably the party's best achievement. The problem wasn't actually breaking the promise - it was making such a preposterous, economically untenable promise in the first place. To give you an idea of how catastrophic such a policy would be - it's a policy the Green Party also supports, which is usually indication enough of its economic absurdity.

The current tuition fees system is pretty much the fairest system imaginable: the government loans to those who need the money to obtain a degree, and it only asks for payment when the post-graduate can afford to repay with a small proportion of their earnings. Anyone who thinks that that is unfair has a pretty peculiar idea of unfairness. What you have to realise is that nothing comes for free in education. If tuition fees are scrapped, then the cost of obtaining a degree is then picked up by the taxpayers. Tax that goes on to subsidise higher education amounts to lots of tax paid by low earners to subsidise people better of than themselves. We know this because we know that two thirds of working people do not have a university degree, and we know that on average obtaining a degree boosts one's life earnings by 60%.

Tuition fee subsidies do something else as well - they artificially ramp up demand for places, which has all sorts of negative spillover effects on how people value university education. Given all this, it comes as absolutely no surprise to learn that Ed Miliband wants to artificially interfere with prices by lowering tuition fees to £6000 (everyone knows it's simply a bribe to win student votes). Admittedly the policy isn't as catastrophic as the Lib Dem and Green proposal to scrap tuition fees altogether, but in proposing to artificially lower tuition fees Miliband shows a similar contempt for the notion of pricing education at its value.

The value of higher education is this. University fees should amount to exactly what it costs to obtain a degree, and fees (prices) should match demand, whereby the right number of people are getting degrees. How do we know what the right number is? This is down to a utilitarian efficiency, which is measured in terms of what we might call practical economic utility. What is meant by 'efficient' here is that an efficient transaction occurs when the overall increase in utility is greater than the overall decrease in utility. In other words, when degrees are priced at their true value - a value that measures costs associated with supply and demand - you have the right number of people doing degrees, and you have the right people paying for them, which is, it won't surprise you, the people actually doing the degrees.

 

* For more on this, see my Blog Why Tuition Fees May Be Too *Low* Not Too High

Don't Listen To The Majority Here - Inheritance Tax Is One Of The Very Best Taxes

After reading today about the Conservatives' promise to raise the inheritance tax threshold, we also learned from a YouGov poll that the public regards inheritance tax as the least fair of all taxes. Most libertarians also tend to oppose inheritance tax, largely due to the fact that it's a tax on capital that's already been taxed at the point of being earned. However, given that tax in general sits uneasily in many a libertarian milieu, their general disenchantment for inheritance tax is hardly surprising.

I happen to disagree with libertarians and with the general public on this. I think that in a world in which taxation is a current necessity in our socio-political system, inheritance tax is about the least bad tax we have. I'll explain, but let me first explain what I do think is bad about inheritance tax.

The negative aspect first
If you can get over the double taxation part, the primary problem with inheritance tax is that it encourages excessive/wasteful spending. If Betty has £650,000 that she stands to leave to her children but knows that they will be hit with inheritance tax, it incentivises her to spend it on them or on herself in her lifetime. It may be a good thing for her and her family that she's spending, but spending money just to avoid giving it to the government is probably going to involve quite a bit of expenditure on things she doesn't really need or value hugely. This wisdom soon percolates: "You can't pass it on so you might as well spend it".

Now over to the positive
I think it's good for society if the government takes something from a dead person's estate when it exceeds a high enough threshold, but it's also important that the government endorses passing on money to heirs that's already been taxed once. The real issue with the government taking something from a dead person's estate and pumping it back into public services is that it spends it on people less in need than the people on whom it should be spent - namely the country's neediest people. I'll come back to that in a moment.

Even if you are Anglo-centric in your redistributive desires, what makes inheritance tax a knotty issue is that it's a bit like higher tax for the rich in general - the majority support it because the costs don't affect them. Currently inheritance tax sits at 40% at a threshold of £325,000. If you're about to be the beneficiary of your dad's £500,000 estate you probably don't support the current threshold because it will cost you £70,000. But if you have no substantial inheritance due to come you probably do support it, because somewhere down the line you'll benefit from other people's inheritance tax.

The most desired goal of the taxpayer is to be taxed in a system that is as fair and efficient as possible. Most taxes fall below an ideal because they come with disincentives (income tax comes with a disincentive to work; savings tax comes with a disincentive to save, and so forth). Even if you are one of the people that stands to inherit a fortune and thus doesn't like inheritance tax, it has to be admitted that as far as the whole of society goes, inheritance tax ticks just about every box in terms of fairness and efficiency. Technically, the person paying the tax is the dead person - it is just a posthumous tax taken from assets no longer needed. Even if you happen to be the imminent beneficiary of your dad's £500,000 estate, you stand to gain £430,000 after tax - which, by any reasonable standard, is enough for a house, a car and a small business.

Moreover, be sure of one thing - if the government doesn't get tax from inheritance it will get it from somewhere else. If it ditches inheritance tax or raises the threshold then a few heirs will benefit, with the rest of the country picking up the bill in increased taxes elsewhere.

There is some truth - much truth maybe - in the notion that it is unfair to tax people twice, but that throws up a different can of worms which I talk about here in this blog Thou Shalt Not Inherit. The content of that Blog post could cast a few aspersions over inheritance tax, but I think the real problem with it (to return to my above point) is that it would be much easier to support it if the government spent its money more wisely. Suppose, for example, the government used all the inheritance tax money it gathered to pump finances into the vital areas of the charity sector that have seen too many drastic cuts. That would be a hugely positive use of the money. But while they spend so much money so unwisely it is easy to be down on taxes like the inheritance tax - even though, compared with just about every other tax, it's just about the least bad tax of all in terms of who pays for it, and in terms of incentives against it.

Some Very Interesting Facts Have Emerged About Poverty, Development and Inequality

There aren't many people in the world more informed on development and inequality than Branko Milanovic, the former lead economist in the World Bank's research department. He's just released a very informative article about the most recent findings on poverty, development and inequality. As you'd expect, and as some of us have been going on about for years, the picture shows that the globalised free market is the primary vehicle for improving living standards and lifting people out of poverty. As Milanovic, tells us, "We can actually find out for the first time, from a single and consistent data source, who the real winners and losers of globalization are". Here is perhaps the most significant finding:

"The bottom third, with the exception of the very poorest, became significantly better-off, and many people there escaped absolute poverty."

Yes, that's probably the most important finding. While it's true that, sadly, the bottom 5% haven't crept out of poverty as fast as we'd hoped (they are the ones for whom the free market still hasn't brought about the same benefits as everyone else), the rest of the bottom third saw real incomes rising between 40% to 70%. In fact, look at this data from CarpeDiem, which shows that in 1970 over 25% of the world's population was in poverty. Forty years later that number is as low as 5%.

What the picture doesn't show, of course, is that if we go back to before the Industrial Revolution almost all of the world's population would be in poverty compared with standards of living today. The reason that the bottom third have joined the rest of us and seen their wealth rise so much is because a great many of the poorer workers in emerging countries like China, India, Indonesia and Brazil have crept up into the mid-range as their countries have benefited from globalisation and the ability to trade more freely and openly.

The other thing you may note is that it is, unsurprisingly, the top 1% that have seen their per capita after-tax incomes rise the most. But that is only to be expected, as they are the 1% of the world's population doing most to increase the wealth of those in developing nations. And by the way, this top 1% isn't merely a handful of corporate fat cats piling up the millions - it is a group of about sixty million people earning over $50,000 a year. Given that people don't become wealthy without providing goods and services that people want, and without hiring staff to provide those goods and services, it is not difficult to imagine how much those 1% of people are contributing to the well-being of people in the world and to the rise of living standards across the globe.

You might also like to note this graph below, which shows the more important fuller picture - that as well as the increases of the top 1% and the bottom third, those who sit around the median (those between the 50th and 60th percentile of global income distribution) achieved an 80% real increase in incomes. It may be of interest to you too to note that those that sit between the 75th and 90th percentile of the global income distribution - what in the UK we'd call the working and middle classes - saw no real gains at all.

If, as is happening, the trade associated with the innovations of the richest 1% is helping to increase the scope of the global market and bring the poorest 50% into higher standard of living, we would expect to see those two groups experience income rises, and also the concomitant effect of increase in inequality in the wealthier nations, while at the same time see a decrease in inequality in the poorer nations. This is exactly what we do find.

But although the free market has been the main vehicle that has lifted us out of poverty and improved the vast majority of human beings' standards of living - there is, as mentioned, one group for whom this global success story still hasn't materialised - and that's the poorest 5% of the world's people. It's important that in being glad of all the good things the free market has done we don't forget those that have yet to be beneficiaries - and that we continue to speak out against (and where possible be proactive against) forces that remain a barrier to their progress.

 

A Curious Thing About The Hand Car Wash

I caught a part of what seemed like an interesting discussion on the radio yesterday lunchtime - about the number of Hand Car Wash businesses springing up all over the country. The discussion, hosted by Jeremy Vine, was between two economists - professor Mike Haynes from the University of Wolverhapton, and Duncan Weldon, the BBC's Newsnight economics correspondent - and they both seemed pretty stumped as to why Hand Car Washing services are taking off with such prominence when by now machines should be doing all the work. I don't know why they were so confused - the answer seems to me quite obvious - but before we get onto that, let me briefly explain why such an issue is interpreted as a problem.

On first inspection, generally what's happening with Hand Car Wash businesses is the opposite of what happens everywhere else - as we usually tend to see technological progression instead of retrogression. For example, you wouldn’t see us ditching our washing machines to return to washing our clothes in the sink; you wouldn't see us choosing to cut our grass with shears instead of using the lawnmower; and you wouldn't see us ditching the vacuum cleaner in favour of using a dustpan and brush to get bits off the carpet.

Similarly, with the current technology of car wash machines in garages, technology should have brought about the gradual diminution of the culture of washing cars with a bucket of soapy water and a sponge. Further, although there are a few vehicles for which car wash machines are unsuitable (mine being one), from what I can make out car wash machines use less water and are no more expensive than rates charged by Hand Car Wash businesses.

Consequently, then, drivers ought to have very little need these days for five or six guys washing their car - but yet we find the opposite is happening - Hand Car Wash businesses are thriving, with new ones springing up all the time, giving hundreds of (usually) migrant workers plenty of opportunity to work hard and make a living.

Given the foregoing, in terms of rational behaviour, what's happening shouldn't be happening - and this is because of something in economics called the increase in the capital intensity - which is basically a measure of output, productivity and growth, where machines are more efficient for the economy than the equivalent manual work of low paid workers.  

The economists seemed stumped as to why drivers are choosing men over machines. I have a few suggestions that I think probably explain it - and they are all to do with how hand washes have various advantages over machines:

1) You can sit in your car and not have to bother going into the garage to buy a machine token.

2) Machines do not wash every part of the car body in the way that humans are likely to.

3) Machines probably come with the increased risk of body damage.  

4) Many drivers probably feel that in using hand washers they are supporting low-skilled migrant workers instead of giving money to larger corporations.

Number 4 is flawed, of course, because the people who lose out to the competition are the workers involved in making and maintaining those machines. But numbers 1-3 are pretty sound, and number 4 is also interesting because I would hazard a guess that many drivers would feel they have an incentive to pay migrant workers instead of handing over money to larger firms like Shell, Esso and BP. Here's why. Migrant workers making a living are people that are much less likely to commit crime or claim benefits - and even if it's only at a subconscious level I'll bet that's a factor in people's decision to buy their labour. All in all, then, I don't see the increasing rise of Hand Care Wash services as particularly baffling - they seem like a natural market niche that garage car wash machines don't quite fill to the same extent.

Ed Miliband's Bonkers Zero Hour Contract Proposal

Ed Miliband's latest attempt to screw up a part of the economy is his desire to legislate on zero hour contracts:

"If you work regular hours for three months, Labour will give you a legal right to a regular contract, not a zero-hours contract."

I have no doubt Ed Miliband isn't ignorant of the fact that such a policy will harm lots of people and help only a tiny few, yet he doesn't seem to care two hoots - he supports the popularity-engendering policy because he knows most people will endorse it based on the help for the tiny few while at the same time being wholly oblivious to the wider harm it will do. If you happen to be one of those few to whom that applies, you'll be happy. But for the vast majority, the labour market of supply and demand involves a mutual allocation of resources (work and wages) far beyond the scope of any top-down management, and with far more efficiency than arbitrarily introduced state-meddling can achieve. Telling employers they must offer a regular contact after three months (a figure seemingly plucked out of the air) can only harm the qualities of mutually allocated resources. This isn't anything more than standard first year economics - something politicians seem to be happy to ignore to buy votes.

What Ed Miliband is missing is the most important point. Yes, some people struggle on zero hours - the part of the labour market that contains much of this kind of work is often insecure, unstable and volatile anyway - but the notion that this law will make things better is moonshine. Here's the key point. The labour market of supply and demand is dictated by the numerous price signals that generate all kinds of information about the value of labour, the supply of services, length of contracts, and so forth. A dentist can work in the same place for 15 years doing a similar number of hours each day. A sub-contracted painter and decorator can work at dozens of places in that time, with varying lengths of contract. Selling labour is not homogenous, it is heterogeneous - and you're just not going to be able enforce better pay or more stability without damaging a whole sub-section of people in that labour market.

So it's not that I'm repudiating Ed Miliband's proposal because I've suddenly developed amnesia about the struggles of people's ability to live or the volatility of the market - I'm repudiating it because its implementation will simply alter the behaviour of employees and employers in the supply and demand market because the vital price signals of information on which the economy runs will be distorted.

It's easy to think of zero hour contracts only in terms of employees, and to imagine most employers to be cold, uncaring exploiters. But it distorts the true reality. Economic policies affect employers as well as employees - and employers are the essential providers in this equation. Make a law that helps low earners and you hinder another group (usually low-skilled employers but also other low earners). Make a law that helps tenants and you hurt another group (usually landlords). Make a law that helps Brits and you hurt another group (usually anyone who isn't a Brit). Nothing comes without a cost.

Employers have lots to consider when they take on people. They have to make forecasts about the future; they have to consider market fluctuations; they have to consider what they should invest; and they have to consider which future state-interference will hamstring them. Zero hour contracts are sometimes opportunities to exploit, but they are mostly opportunities to reduce risk in a frequently unstable market, and create lots of short-term employment.

Think who the beneficiaries of zero hour contracts might be - students, single parents, retirees, those looking for additional employment to top up their main job, and those with multiple part time jobs. The ability to work flexibly as and when they want is a very beneficial thing for them. Ed Miliband's proposal to ruin theirs and their employers' flexibility is narrow and short-sighted.

What Ed Miliband also doesn't understand is that the kind of economic growth enjoyed when his party was not in government is the main vehicle that will reduce zero hour contracts for those not happy with them. The reason being, job growth increases the necessity for employee stability, which will only diminish the allure of zero hour contracts for both employers and employees, because employers are going to want stability in their personnel. Moreover, as unemployment rates fall and job creation continues to take place, greater power is transferred to jobseekers, which places selection pressure on firms offering less desirable contracts. Ironically, Ed Miliband's proposal will uproot some of the stability in the market, which will more than likely go on to have a cobra effect type scenario whereby he contributes to an increase in zero hour contracts - the very opposite of what he's trying to do.

The state's best role is to reduce the tax burden for people on low incomes or in a volatile part of the market, and give them the supplementary financial help they require, leaving those vital price signals untouched.

It's Not The Getting Caught, It's The Speed

I was interested to read about our politicians' recent predilection for dystopian nanny-state policies in this Telegraph article - Stealth cameras to be installed on motorways. Basically, these camouflage cameras (clearly just a way of making lots of money through increased speeding fines) will catch drivers unawares, and once these devices become ubiquitous they will all but enforce a 70mph speed limit for every driver on every motorway in the country.

While this is annoying and most unwelcome, what struck me as strange is that from what I've seen the general objections to this seem to be focused on the fact that these cameras are stealth cameras, when the real issue is not whether the cameras are hidden or not but whether the speed limit is right. For what it's worth I think the 30mph and 40mph speed limits in built up areas are about right, but motorways (and the major A roads) should be higher. But whether it's right or not is surely the only real issue here.

I should imagine the situation is roughly like this. If you think the speed limit is wrong then you're going to object to stealth cameras as an exacerbation of a current wrongness. On the other hand, if you think the speed limit is right then logically you should have no objection to whatever tactics are used to catch people speeding, any more than you would object to devices that catch theft, vandalism and graffiti.  Yes, I grant you, theft, vandalism and graffiti are different crimes to speeding, but that doesn't invalidate the point - the rationale works for all cases; that the annoyance is not annoyance at stealth tactics to catch offenders, it's annoyance at the speed limits being too low.

Put it this way, suppose a new stealth camera was introduced, but only for vehicles exceeding 140mph - there would be far fewer objections, because almost no one has any trouble with the notion that 140mph is a crazy and dangerous speed to drive. Given the foregoing, the vast majority of complaints about stealth cameras seem to me to really be complaints about the speed limits - because if the following applied in that you a) agreed with the speed limits, b) considered the speed limit levels to be contributing to safer driving and fewer injuries and deaths on the road, and c) supported laws that prosecuted people for breaking the speed limit - then you should have no objection to devices like stealth cameras being used to catch offenders and make the roads safer.

I'm not in favour of them because I'm not in favour of the current speed limits. If, for example, I thought the motorway speed limit should be 95mph, then rationally speaking I could have no objection to stealth cameras that caught out any driver doing 96mph or more, any more than if I thought theft, vandalism and graffiti should be outlawed I'd have no rational objection to any stealth devices the police wanted to use locate incidences of theft, vandalism and graffiti, so long as those devices didn't encroach on the freedoms of ordinary citizens, of course. As much as I enjoy fast driving, it's hard to deny that if the speed limit was as high as I wanted it to be, say 95mph*, then stealth cameras that penalised 96mph or more would only infringe on the liberties of drivers breaking the law.

 

*Adjust the variable according to your own preference

The Problem Isn't Just Clarkson, It's The BBC Too

The BBC has an extraordinarily high number of good looking female presenters. It is evident that when it comes to the job of a TV presenter, ugly males are discriminated against at a ridiculous level. Only joking.

Behind the joke, though, there is an element of truth - television companies appoint presenters based on what they think the viewers want. If they favour good looking women then ugly men are being discriminated against. If they favour intelligence then unintelligent people are being discriminated against. But in protesting about this what we're actually doing is protesting about viewers' tastes, because it is viewers' tastes that contribute most to television programmes.

Viewers prefer an intelligent person hosting Newsnight; but they don't mind unintelligent people in the Big Brother household. Naturally, Newsnight and Big Brother have largely different audiences - but that is precisely why viewers' tastes work differently for each show.

I hadn't planned on blogging anything to do with the recent Jeremy Clarkson affair, but it can't be left unsaid that even if his straight-talking, non-pc libertarian politics was anathema to the BBC, his sacking was actually down to his repeated bad behaviour for which most other people would have also been sacked.

But while we've seen the emergence of a heated debate between Clarkson's supporters (who wish he hadn’t been sacked) and the many opponents (who are glad he has been), the big issue that underpins it is the very existence of a state-funded BBC imposed on everyone in the UK through a compulsory licence fee. State-funded television is a guaranteed way to ensure that the corporation will not primarily be driven by providing the best TV for its viewers.

Suppose Café Nero suddenly came under state ownership, where the need to provide desirable products and a good service was alleviated by the guaranteed flow of taxpayers' money. Do you think Café Nero would then be better or worse? It would obviously be worse, because all the market pressures to consistently perform well and give people what they want (or lose out to competition) would diminish.

Similarly, being guaranteed by state-funding, the BBC is less alert to the market pressures that other companies have to consistently provide popular TV. The current director of BBC television Danny Cohen (pictured next to Clarkson above) has done something akin to a Café Nero executive who decides to remove one of the top selling coffees from the menu - a move that would guarantee to upset and elicit action in the Café Nero shareholders.

It's not first time Danny Cohen has done this. He's the chap who demanded that all-male BBC panel shows must be discontinued. He's also the chap who insisted that the BBC's comedy was too middle class. He's also the chap who publicly asserted that the BBC needed much more diversity in its programmes.

Being state-funded, the little notion of letting the viewers decide what and who they want to watch is pretty alien to the BBC. To see why, imagine a time when television watching is even more sophisticated than it is now. In the future all viewers' experience involves paying only for the packages or channels or individual programmes they want to watch. In other words, what you watch and what you pay for would be entirely dictated by your personal preferences. Instead of some priggish left wing bien pensant director asserting how many males are on a panel, how middle class the comedies are, how many black or white people there are in each drama, and which presenters should be sacked, the public would vote with their most powerful tool - by staying tuned, by changing channels, or by switching off.

Given that I'm a mandatory license fee payer, I don't actually have any issue with Clarkson's sacking in this particular case. After punching someone, the BBC felt they had to act tough on Clarkson and make an ethical decision, even if it means losing a popular presenter and a popular TV show to another channel (probably SKY TV). But I hold that view largely because I don't really like Top Gear or have much interest in Clarkson. If the BBC sacked someone you or I really loved watching, and denied us the opportunity to vote with our remote control, I think we'd feel the dissonance a bit more.

In all likelihood, most people who support Clarkson's sacking are probably people who aren't that bothered about watching him and Top Gear, whereas most people who wish he hadn't been sacked are probably people that do like watching him and Top Gear. And that little fact alone gives perfect exhibition to the extent to which the BBC is in need of market forces.

Voting Qutopianism (Warning: High Wonk Content Contained Within)

People who favour democracy should wish for votes to translate into MPs, but alas, as things stand the constituency boundaries currently favour Labour and disadvantage the Conservatives, because they are not of equal size, and because Tory votes are often heavily concentrated in safe seat areas.

The proposal to reform the boundaries was blocked by the Lib-Dems in coalition a couple of years ago - a reform that would have seen the number of MPs reduced to 600, and the constituency boundaries being of roughly equal size, making the political outcome much more representative as the Conservatives would have gained between 20 and 25 extra MPs. Until those boundary changes occur, the people of Great Britain will not be democratically represented in a way that reflects their votes.

Not only does percentage of votes not translate consistently into number of seats - number of seats doesn't translate into voting power either. At the low end there is no direct link between a party's influence and its number of votes.

Imagine a reduced parliament in which there are only 120 MPs.  The Conservatives have 50, Labour has 40, The Lib Dems have 20 and UKIP has 10. Despite Labour having twice the number of MPs as The Lib Dems, a coalition between The Conservatives and The Lib Dems would give them a majority, and give Labour less power than a party that obtained half their MPs. There are a vast number of inter-party permutations for coalitions, meaning that a party with relatively few votes can be nearly as powerful as a major party in a coalition, or equally pretty much powerless, depending on how the land of the coalitions lies.

While we're in the mood for oddities - some of you may have heard of Kenneth Arrow's 'impossibility theorem', which proves that an aggregation of society's individual preferences doesn't translate into a comprehensive aggregate societal preference. Let me try and break it down this way. Imagine the three big leaders are running for a national popularity contest, and observe the strange goings on that occur here. Let us say that a third of the electorate prefers Ed Miliband( M ) to Nick CKlegg ( K ) to David Cameron ( C ), another third of the electorate prefers K to C to M; and the remaining third prefers C to M to K. There is nothing particularly strange about this until we consider what happens in two person contests given the above preferences.. M can boast that two-thirds of the electorate prefers him to K. C responds that two-thirds of the electorate prefer him to M. Finally, K counters by noting that two-thirds of the electorate prefers him to C.

In mathematics, a binary relation over a set is transitive if whenever an element a is related to an element b, and b is in turn related to an element c, then a is also related to c. If the societal preferences in what I’ve just said are determined by majority vote, we have an irrational ordering of preferences; that is, ‘society’ prefers M over K, K over C, and C over M. Thus even if the preferences of all the individual voters are transitive (by that I mean that transitivity holds if, wherever a voter prefers Cameron to Miliband and Miliband to Clegg, he or she prefers Cameron to Clegg), the societal preferences determined by the majority vote are not necessarily transitive and thus not necessarily rational either.

Kenneth Arrow's theorem demonstrates that given the foregoing all reasonable voting systems (or equivalently, economic market systems) are subject to such irrationalities.

Let me try to posit some further clarity with a different illustration. Think of our three leaders M, K, and C as cars rather than people, and then think of a woman deciding which of the three cars to buy. Let’s give her three criteria (interchangeable and commensurate with one another) for making this decision; looks, affordability and performance. Car M looked better than car K, which looked better than car C. On the other hand, car K was more affordable than car C, which in turn was more affordable than car G. Finally, car C performed better than car M, which performed better than car K.

Since the woman placed equal and commensurate measure on each of these criteria, she would be in a bit of quandary here. She clearly preferred car G to car K (M outscored K on two criteria). She also preferred car K to car C (for the same reason) - yet she preferred car C to car M. And if you are following here you will see that the same problem of non-transitivity holds for individuals, and that when broadened out to an election it leaves a bit of a detritus. In the case above one only need induce the woman to declare one of the criteria more important than the others. This is easier than convincing one third of the electorate to change its mind.

Given the foregoing; there are four conditions under which consistency will show that we cannot derive societal preferences from individual preferences…

1) The societal preferences must be transitive (if society prefers x to y and y to z then it must prefer x to z)

2) The societal preferences must satisfy the principle - if alternative x is preferred to alternative y by a majority in the society, then society must prefer x to y.

3) The societal preferences must satisfy the independence of irrelevant alternatives (the societal preference depends only on the orderings of the individuals with respect to alternatives in that environment).

4) The societal preferences must not be susceptible to autocracy - there is no individual whose preferences automatically determine all of society’s preferences.

As for the realities of the electoral situation, of course we know that the political portrait of lucidity has been gravely disfigured from the bottom up as much as the top down, so the absolute best that one can hope for is that through the media-manipulating smokescreen the impressionability and cognitive indigence does not wholly impair the view of those gazing in, and that in the absence of a good rationale people’s gut instincts amount to enough in seeing who is very evidently the least bad party for the job - at least in the next few years.

 

Climate Change Debate Part IV: The Final Cost-Benefit Analysis

Here we are with the final part in the Climate Change Debate series. We've seen in parts one and two how our foresights into the future are mostly beset by uncertainty, and how the present (not the future) should be the primary consideration for the debate. We saw in part three how the science is right about many of its claims, but that caution is of paramount importance. Now to conclude we'll undertake a cost benefit analysis about whether green policies in the here and now are good or bad in net terms. I will look to show, in the arms race between green polices and scientific augmentation, that science is a heavy odds-on favourite when playing the long game.

When debating climate change a lot of people just don't get this one key point they really need to get - that it's all about the net result, not just whether we are causing harm.

This Greenpeace page is a typical example of an article that conveys the basics of the dangers of climate change. Here's the main crux of what we are told:

"Climate change is caused by the build up of greenhouse gases - from burning fossil fuels and the destruction of areas that store massive amounts of carbon like the world's rainforests. No one knows how much warming is “safe” but we know that climate change is already harming people and ecosystems around the globe".

Do we know this in 'net' terms though? We know that climate change is occurring; we also know, or are willing to consider, that humans are contributing to a vast proportion of it. But as far as I know we don't know what proportion of climate change is down to humans - and if we don't know that, we certainly do not have any justifiable substantiation that our contributions are harming the planet in terms of net harm. I've no doubt many people could send links to papers in which people have alluded to plenty of correlations - but I'll wager that those papers do not contain any evidence for causal links that demonstrate beyond reasonable doubt that the human contribution is the thing that's causing harm. Remember that key difference: there's a difference between causing climate change (which all of us should be ready to accept) and causing aggregate harm (which all of us should not be ready to accept). If our activities are not causing net harm, then many if not all the current environmental policies enforced on us may be misjudged.

The green position seems to be: assume we have justifiable substantiation that our contributions are harming people, and in response take mitigating action. This is not a very sensible thing to do. The method should be, first obtain confirmed evidence (remember, evidence of net harm, not evidence of humans causing climate change), and then act on it.

A friend of mine once objected to this as he used the following analogy to try to justify the notion that preventative action is a way of minimising the harm: "You don't wait for a probable whooping cough outbreak before vaccinating children against it”. In some cases preventive action is good. But his is a bad choice of analogy - it is easy to assess the net harm that whooping cough does to people's health, and there are very few offsetting benefits to whooping cough either. Neither can be said of green measures. Plus vaccination against whooping cough has few detrimental effects on the economy and on our liberties and freedom - whereas green measures have plenty.

What greens have to demonstrate is evidence that the human effect brings about net costs, and that green acts of mitigation bring about a net gain. I have seen evidence for neither. To put it another way, even by asking whether there is justifiable substantiation that our contributions are harming people, they are asking the wrong question. There's no doubt our activities cause some harm (even taking a flight to Canada or a taxi to the train station causes some harm) - the vital question is, does the net harm outweigh the net benefits, and do the mitigating activities confer more benefits than costs? If the answer to both is no - and I'm pretty certain it is - then mitigating action should be diminished - not wholly discontinued, perhaps, but diminished.

The greens tell us that 'catastrophic changes' are occurring, and that we are precariously getting swept up in a vortex of climate change. My main reason for being at odds with green-centred politics is that the fundamentals behind their ethos - "The climate is being negatively affected; humans are negatively affecting it, therefore the continuing trend is bad and needs drastically addressing", is in my view the ethos that’s presumptuous, unsubstantiated and spurious.

The problem with the above claim is that it is an assumption made without qualification. Whenever you have a situation in which X is happening (where X is negative), and Y is causing X, one can't just proclaim that the continuing trend is bad and needs drastically addressing, because there may well be other ways in which X's negativity is being offset by other factors not in the equation. 

I have only ever seen greens talk about the harms caused, they have never once compared those harms to the benefits and shown a net cost, which means they still have all their work ahead of them. Their fault is on focusing on a few global bullet points (sea levels rising, overall temperature increase, deforestation) and treating them only as bad, or as bad but understating the good outcomes. Yes, overall temperature increase contains bad effects (although one can't be certain that temperature increases are going to continue on this trend), but it also contains good effects too, as I'm sure the people of Greenland, Siberia or Alaska would testify.

As is usually the case, an economic way of thinking would guard against falling for the kind of errors the green-keens are making - because economic thinking wouldn't just involve asking whether there are good and bad effects - it entails wanting to know if there are net costs sufficient that the bad effects outweigh the good effects. How are we to tell, say, if rising sea levels in the Indian Ocean balances out with the emergence of more habitable areas of Siberia or Alaska? Don't forget this won't happen overnight - it happens over decades and centuries, so any considerations that factor in sudden and unexpected inconveniences are a solecism against good enquiry.

Don't forget also that if you asked a man in 1913 about how the world would look on a global level in 2013, he'd have no way of foreseeing it in its current set-up. If environmental changes occur over such slow passages of time, then in a few decades countries surrounding the Indian Ocean may well be well prepared for rising sea level, and Siberia or Alaska probably will hugely benefit from increased global temperature. From what I can see from looking at their literature, the greens haven't offered any proper cost benefit analysis on the dynamical change of global states - they've merely prodigiously estimated the costs and exiguously estimated the benefits. Of course, that doesn't mean the greens are wrong - it only means the methods by which they think they are right are faulty.

In offering an economic view of the situation - one that has no ideological biases - I'll tell you how I think it really is. Climate change is presumptively unwelcome, whether it is hotter or cooler, because present human endeavours are optimised specifically for present day conditions. Whether you're farming, building factories or houses, or designing railways or cars, you are optimising the production for modern day use consistent with modern day conditions. But environmental changes are gentle century-long slopes not steep month-long drops - so once you consider the extent to which activities associated with farming, factories, house, railways and cars will have changed in a century to be coterminous with the gradual changes in the environment, you see there are probably no crises at all. Given that the earth's climate and environment has been changing for millions of years, it is obvious that no climate of any time is the optimal one in absolute terms.  If there is no reason to believe that the present climate is the optimal one, then assertions that we need to be preoccupied with green issues are hard to justify, as adapting to the gentle century-long slopes of change is not only something we have to do, it's something we've been doing since mankind began.  Economic thinking enables us to not fall for these extreme knee-jerk reactions - as the climate throughout our human evolution has varied by considerably more than the comparably meagre changes being predicted for global warming in the next few hundred years.

It's because humans have lived, survived, increased in numbers and prospered over a range of climates much greater than the predicted range by climate-obsessors that economist-type thinking must, for me, involve some raised eyebrows.  It's fairly obvious that if there's no reason to believe humans will be negatively impacted by future climate change, with every evidence that our present and future innovations will more than offset any environmental shifts, it's equally absurd to bear sizeable resources (time, energy and money) trying to prevent this change. I'm not saying we shouldn't be mindful of being more environmentally and ecologically prudent, nor that we should avoid doing what we can to diminish the extent to which environmental change occurs with rapidity, but that's a far cry from addressing the issue as being an urgent, costly and radical necessity.

You are quite welcome to hold the view that there are more negative effects to global warming than positive effects, but to make it fly you must provide reasons to justify it - you can't just exaggerate the negatives and understate the positives, and decree yourself to have taken the right stance on this. I'm interested in compelling arguments, and evidence-based conclusions - but I haven't heard any yet, so for now I remain sceptical, particularly as being green-focused seems to aid popularity amongst the electorate, which does, of course, provide political parties with the motive for propagating unbalanced green-keenness.

If you instantly transported the UK 1950s population into the present day they would be quite flustered by all the changes: not only would they find technology, protocols, laws, customs and practices that baffled them - they'd find numerous changes for which they weren't prepared. What they thought was an allotment is now a shopping mall; the old tea room is now a McDonald's; and bugger me, the farm down the road is now a motorway. Radical changes to normalcy do cause lots of problems. But we are not talking about any such thing. Just as the 1950s gradually changed into the present day by passing through the 60s, 70s, 80's, 90's and noughties, so too will changes in the climate occur alongside our ability to adapt to the changing social backdrop.

A proper cost-benefit analysis

It's all very well saying 'cut down energy use' - but first we have to determine whether that energy use is worth cutting down, or whether we will develop the augmented science to adapt. In the ways that we can reduce our energy without huge costs (perhaps even net costs) fine - but if we just go all out for reduction reduction reduction (as the greens want us to) we fail to locate the point at which too much reduction is occurring.

The situation is roughly like this. If I want to build 25 houses in a green park area, the state of affairs from both sides has to be weighed up. There are clear benefits (more people having somewhere to live) and clear costs (fewer people having somewhere to play or have picnics). Does the benefit of 25 families having a place to live outweigh the costs? That depends on who you are, and your perspective - but whichever way we cut the cloth, a cost-benefit analysis would be necessary.

Green taxes are basically equivalent to those on the economic left trying to buy a world with fewer emissions, which means a reduction in greenhouse gases and a cooler planet. Just like the park situation, a cost-benefit analysis is necessary - one which no one I know seems to offer us. To automatically assume that the price we pay for a cooler, greener planet with fewer emissions and a reduction in greenhouse gases is a price worth paying is ludicrously presumptuous.

Why carbon taxes are flawed

The problem with carbon taxes in the present day is twofold: 1) It is likely to be the case that a partial effort will not have the desired effects, and 2) An all out collective effort will probably end up being a bigger cost regarding time and money than the alternative option of more heavily investing in infrastructure to pre-empt future problems.

Number 2 is fairly obvious, as I’ve alluded to earlier - it is fairly pointless throwing billions of pounds at green policies when we can instead help the neediest people more directly with investment and aid, as well as eliminating the barriers that stop them trading. Number 1 might be less obvious at first, but it should soon be fairly obvious when elucidated. In life, partial efforts are often good, particularly if the results are not impeded by others' non-involvement. Giving to charity is a case in point - if 30% of UK folk donate to Save The Children then poor children still benefit because despite 70% not giving to that charity (some may be giving elsewhere) what they do collect still helps. Similarly if 90% of the country picks up litter then their efforts are not wasted because the other 10% did not. In the cases of charitable donations and litter picking, every little bit helps - and despite being simple on the surface, this is measured with rigorous economics (basically, if the Pareto efficiency or Kaldor-Hicks efficiencies are such that negative externalities are immeasurable or inconsequential to the positives then every little really does help).

But when it comes to reducing your own carbon footprint, things are different - because every little bit does not necessarily help - not in net terms. There are two reasons why this is the case: Firstly, reducing your own emissions is a solitary effort that will have no real impact at the global level. Even if 50% of the UK's citizens made a concerted effort to reduce their carbon footprint it would still be a drop in the ocean compared with the triune considerations of a) overall global consumption, b) the extent to which climates change outside of human involvement, and c) the comparative advancements of future generations.

And secondly, your reduced consumption will be offset by increased consumption elsewhere. As a hypothetical social experiment, suppose half the UK population were randomly drawn in a lottery and made to reduce their carbon footprint by 20%, with the other half free to carry on as normal. Here's what would happen. The reduction in consumption by half the people would reduce aggregate demand for ecologically unfriendly goods, which would see a drop in their price, which is going to increase consumption for others. What the 50% will actually be doing is helping out the other 50% in buying cheaper fossil fuels. Obviously that's too simplistic because there are global factors to consider, but they do not affect the truth of the statement that reduced consumption for some will mean increased consumption for others. 

If you can't get your head around it, imagine what would happen to the price of high heeled shoes if half the high-heeled shoe wearing women in the country stopped wearing them and reverted to flat shoes instead - the other half of the demographic would buy more pairs because they'd be getting them a lot cheaper. Moreover, because politicians can only bring about the imposition of green taxes on their own citizens, not those of other countries, the same problem will apply at a global level - reduced consumption for some countries will mean increased consumption for those other counties that will be beneficiaries of cheaper fossil fuels. The cost incurred by those carbon-reducing countries will thus have a limited payoff in terms of overall global reduction, so one can argue that they are being hit unfairly.

So it is literally the case that unless the vast majority of the world’s population are singing from the same ecological hymn sheet, environmental progress in some areas will be cancelled out by environmental regress in other areas. Given this realisation, it is even harder to justify green climate policies like carbon taxes. Politicians around the world, though, don't see things that way because they can simply impose Pigouvian taxes on the whole country, penalising everyone for consumption, emissions and pollution, in full knowledge that most of the country is either too apathetic or too daft to challenge it.

When governments can't solve a problem, you can be pretty sure that quite often the market can. The Mises Institute gives a summary here of how the market can introduce accountability to take the place of carbon taxes. But despite being a libertarian, I'm going to suggest that I don't think market forces will come in and transform this in quite the way the Mises Institute hopes; the time, money and energy expended in getting all these market forces up and running may well cost more than the benefits they engender, for reasons that will be clear shortly.

Carbon taxes: flawed but worth supporting?

Consequently, then, despite the many flaws in carbon taxes, because of the discontinuity between the status quo and the full market solutions, I'm going to tentatively argue that carbon taxes are perhaps the best option as a short term solution. I'll break this defense down into 6 key points.

1) The main defining problem of climate change is that we are all part of the problem as well as part of the solution. We all rely on vehicles that clog up the road for others, pollute the air, and put the price of fuel up. We also use our central heating, wash our clothes and buy things that came from widespread transportation. Many of us even use aircraft to fly abroad, and run businesses that emit lots of carbon. The upshot is, we all contribute to greenhouse gas emissions, so what's needed is a collective effort to change things.

2) This kind of activity has indirect consequences for people who live near rainforests, people in hot countries, and it may well even have consequences for people who haven't been born yet. Even though both the problem and the solution is a shared one, it is difficult to get everyone to co-operate in shared solutions, which is where the State comes in.

3) The State imposes price increases on our transactions in the shape of carbon/pollution taxes, which incentivises us to be self-interested in being more responsible with our environmental activities. One problem I have with carbon tax is that due to lots of asymmetry of information the setting of a carbon tax rate is almost entirely arbitrary. Still, despite this, carbon tax does some good for the following reason. People change their bad consumption behaviour to accord with differing incentives like price changes. So for example, a tax on carbon dioxide emissions of £50 or £60 a tonne would affect our consumption habits in relation to products and services associated with carbon dioxide emissions, whether it be driving, flying or whatever.

4) If this tax enabled the government to reduce taxes in other areas, then the carbon tax would help us change our habits and at the same time bring about selection pressure in the market for us to be more mindful of the environment. This is part of a general law of economics – when prices go up or down, people change their buying habits. If the price of red grapes goes up by 40% and green grapes stay the same, people will buy more green grapes and fewer red grapes. If the price of emitting carbon goes up, people will lower their CO2 emissions, which will place selection pressure on consumers and on eco-unfriendly businesses. This means that as carbon/pollution taxes endure, people will look for more ways to be greener, making us as humans more mindful of our environment.

5) Given the foregoing, it would seem to me that we appear to be doing about as much as we can to tackle climate change. That is to say, we keep hearing about how we need to act urgently to save the planet from destruction (whatever that means), but we seem to be already doing all we can to raise awareness and change people's behaviour. Ok, so perhaps we aren't doing everything we can - there is always more that we can do, but what? We are already penalised for our emissions, and we already pay higher prices for our carbon effects, and these things give us the incentive to be greener.

6) The green taxes will almost certainly bring about a phasing out of environmentally unfriendly activities. The scientific and technological capabilities we acquired in the past few hundred years is what confirms to me that we are doing as much as we should be doing, and that on top of carbon taxes, our science, technology and market activity should do the rest.

It is this last point that makes all the difference in being able to defend the short-term solution of carbon taxes, because our science, technology and market activity is what will ultimately bring about the changes needed.

The future science saving the day

So the proper cost-benefit analysis has been this: what are the costs and benefits of intervening in global warming, and what are the costs and benefits of letting it continue and doing nothing costly to slow it down? That depends on another crucial question - will future science and technology enable us to make corrections for global warming and adapt to the changes that have been caused by the increased CO2 emissions in recent decades? If the answer is yes - and all the indicators point to it being yes, then these green-centred Pigouvian obsessions will have been merely a temporary nuisance that we lived through in the intervening years.

In other words, there is an arms race between science and green polices, which science looks sure to win. Looking at some of the breakthroughs in nanotechnology and shape-shifting, as well as virtual reality simulations, gives strong indication that science will win the arms race, which also gives strong indication that green policies are causing harm in the here and now and are not going to have any net aggregate positive effects on the well-being of future generations.

Even if future capabilities will be such that climate issues will more than likely be subjugated by newer technological advancements that wean us off natural resources and enable us to harness safer potentialities, the issue of what we should do in the here and now still looms large.

You may ask how we know we'll augment our technology, and why we can be so confident about it. The reason being, it's the same indicator that we've seen in every walk of industrial and technological life for the past two centuries. Human endeavour is about improvement, which is about innovation, problem-solving and adapting to change. Obviously there are ups and downs, but the general trend is progression. Let me give you an example of justified confidence by focusing on one thing - solar power (I've picked this because it's probably going to be the kind of energy that most transforms our scientific advancements). Using solar power technology we can convert the sun's light into energy. When I was a lad even solar powered calculators were an impressive novelty - plus we had a little knowledge of how in the 1950s scientists powered a weather space satellite using solar energy.

Nowadays, and even now still in its relative infancy, we see solar panels on many roofs reducing people's heating bills; we see solar powered electric vehicles with EV charging stations; we see super skin controlled by solar power; we see solar powered E-Reading; we see solar tracker solar panels; and solar powered computer keyboards, to name but a few. It won't be long before solar energy powers just about everything: planes, buses, spaceships, buildings - you name it. Multiply those solar examples by all the other individual and collective achievements (past and present) and you'll see there is reason to have confidence in our future advancements. For now, though, as these future innovations continue to gather momentum, and as we gradually wean ourselves off the dependency of fossil fuels, I'm willing to accept that, as the best of several imperfect alternatives, carbon taxes are perhaps the best way to see us through this. Remember too, that taxes acquired from carbon emissions are taxes that don't have to be acquired from other activities. It's a golden rule that if you tax something you get less of it - so taxes that reduce our pollution but at the same time reduce our tax paying in other areas seems like the best of a bunch of less than ideal solutions.

Hopefully after our analysis you have a clearer picture now of everything that is wrong with the climate change assessments, and how much more wisdom needs to be applied to the human reaction to climate change. The final summarising point I want to make is that in light of what we’ve concluded, a sensible policy on climate change is still needed – whether that policy is to do less, more, or something different. When the State intervenes to mitigate the extent to which humans harm the planet, they are trying to prevent future damage by minimising present benefits. If present benefits outweigh future costs we should carry on enjoying them, and taxes and regulations imposed upon them are more harmful than good. If future costs outweigh present benefits then taxes and regulations imposed upon them are more good than harmful. This is what is meant by maximising utility - net benefits outweigh net costs. Greens believe that things like carbon taxes maximise utility. Sceptics like myself believe that carbon taxes far from maximise utility (even though I support them as a least bad solution). The right amount of carbon tax is this and only this: it is a tax that imposes prohibitive costs on low-utility activities while still allowing for high-utility activities. The trouble is, due to the complexity and inability to see into the future with any degree of rigour, the level of utility is hard to distil, leaving us only with probability.

The probability estimate is roughly this; if activity A has significant emissions and few offsetting benefits to make it a low-utility activity then carbon taxes on it should be encouraged. If not, carbon taxes should be discouraged. If activity B has significant emission but enough offsetting benefits to make it a high-utility activity then carbon taxes on it should be discouraged. Where the future costs outweigh the present benefits we should make the activity price prohibitive. Where the present benefits outweigh future costs we should make the activity price conducive. If under a system of high or maximum utility we can't go on to produce an alternative to our carbon taxing system then we know we are doing the best and most practical things; if we can go on to produce a better, higher utility alternative, all the better.

Let me give you a simple illustration to show this: take cars. Either the future technology will or won't turn our car industry from a high emissions petrol/diesel generated industry to a low emissions electric/solar powered industry. All the evidence thus far suggests that it will (there are electric car prototypes in place, even as we speak). Give it a few decades and there'll probably be very few if any petrol or diesel driven cars. So, then, using our utility measurement above, the right kinds of car will be produced in the future if it's efficient to do so - and this will happen irrespective of whether the State influences the market or not. It's true that carbon taxes swing the incentive towards more environmentally friendly industries but that doesn't mean it's a good thing. Taxes on foreign charity may well swing more donations towards the British Heart Foundation, but that doesn't mean this swing is a good thing either.

Here's an example of how not to undertake this analysis. The Liberal Democrats, driven by Tim Farron, want to ban all of the standard petrol or diesel driven cars by 2040 and allow only vanishingly low emission vehicles on the roads (presumably they mean electric and solar). A simple understanding of the cost-benefit analysis above would show that such a ban is irresponsible and unnecessary. Here's why. If the present benefits of petrol or diesel driven cars outweigh future costs we should carry on supporting them, and taxes imposed upon them are more harmful than good. If on the other hand future costs of petrol or diesel driven cars outweigh present benefits then taxes imposed upon them are still more good than harmful. Translated in terms of what the future will hold, what we are saying is: if future technology brings about electric or solar vehicles with greater utility than petrol or diesel vehicles then we'll see a natural switch driven by voluntary market choices, rendering the Liberal Democrat ban entirely unnecessary. But equally, if future technology brings about electric or solar vehicles with less utility than petrol or diesel ones then we won't see a natural switch driven by voluntary market choices, which means that banning such vehicles (or even heavily taxing them) will make us all much worse off. Either way, a ban is a foolish thing to impose.

Final point

Finally, on the issue of the present vs. the future, consider this question: who would find it easier to adapt to climate change - a population living in 2014 or a population living 1814? Clearly the answer is 2014. Economic, scientific and industrial advancement make it easier to adapt to the climate. The logical corollary is that even if we admit that the human innovations of (in particular) the past two centuries have caused significant climate change, it is far more practical to facilitate the economic, scientific and industrial advancements to adapt to it than it is to discontinue it. With this truth acknowledged, coupled with the earlier analysis, it is quite obvious that future generations will adapt to climate change much more easily than we could. Moreover, whatever we conclude with regard to our responses to climate change, we will not make bad policies better. For example, even if from our analysis we had concluded that a big State-driven effort is needed to mitigate the problems of climate change, it won't alter one jot the fact that the plethora of anti-market policies will continue to make things worse not better. For example, even if we decide that plenty of action is required, that wouldn't suddenly make protectionism, government subsidies, bail outs and excessive regulation more attractive.

The other danger is that with excessive green influence in our politics, anything can too easily be ascribed to climate change. Whenever ice melts we are accused of burning too many fossil fuels; whenever there are hurricanes we are to blame for increasing ocean temperatures, whenever there is a flood, a drought, heat waves, a shift in the Gulf Stream, it's all to do with human impact. And when these things happen, the first reactionary response is to implore the government to do something about it. Do these reactionaries think that floods and hurricanes and glacier melting have only occurred since humans have been around? Surely not. Don't misunderstand, I'm all for sensible mitigating action where it can be shown to be sensible, but the danger of looking for government intervention every time a snowflake melts is something that is likely to lead us astray.

Here's another obvious cost (and danger), aside from the billions of pounds - green biases skew the market in favour of renewable resource industries. If the greens get their way, they will spend inordinate amounts of money impeding the industry of the developed world, which is going to have a hugely detrimental impact on the developing nations still trying to capitalise on the industrial market of prosperity. The predicted temperature change over the next century is going to be well within the ingenuity of modern day humans, even for countries like Ethiopia and Sudan who look most likely to suffer from increased temperatures.  Don't forget, while there are many countries that will be precariously worse off due to climate change, there are many others that will be better off.

Clearly no sane and moral human wants to argue that, for example, Siberia's gain is Kenya's loss, and that one set of benefits offsets another set of costs - but the motion clearly calls for some wisdom here. If you have a situation whereby some countries are going to be worse off due to temperature increases over the next few decades and some better off, it is both ridiculous and nonsensical (not to mention harmful) to generate huge costs on an entire market industry, instead of the much better alternative of ensuring that the success of advanced economies goes towards facilitating positive changes for the less advanced economies. It may even be the case (and sadly, seemingly is) that in some of the worst cases our potential for aid and investment through advanced economic mechanisms are disempowered by various impediments in those countries (civil conflict, social unrest, political instability) - and that is devastating, but it certainly is not a situation that can be made any better by green policies.

 

* Photo courtesy of CartoonRob

Tax Poetry

In response to the Budget, there was an interesting article from Philip Booth at City A.M on the fraught nature of inheritance tax. One paragraph though seems so obviously misjudged that I have to wonder if I'm misreading it, as Philip Booth is not someone who would normally do this. He says:

"Many countries that have retained an inheritance tax instead tax recipients on their lifetime gifts received rather than taxing people on their assets when they die. Indeed, it is more logical to tax the beneficiary of a gift rather than the donor."

Unless I'm not reading him aright here, this makes no sense to me. He says "It is more logical to tax the beneficiary of a gift rather than the donor", but in the case of inheritance tax it is the beneficiary who picks up the cost, as the donor has already died. So in both of the cases he mentioned, it is the beneficiary who is ultimately being taxed, either on his gift or on his inheritance - there is no distinction as Philip Booth claims.

Never mind, I just wrote my own version of the Tax The Land poem - a sort of remake for the modern age:

Tax his work, tax his pay

Tax him on his holiday.
Tax his shares, tax his stocks,
Tax his pants and tax his socks.
Tax his savings, tax his debt,
Tax him on every cigarette.
Tax his car, tax his home,
Tax his lawn and his garden gnome.
Tax his exercise, tax his rests,
Tax his pay rise and all he invests.
Tax his food, tax his drink,
Tax everything but the kitchen sink.
Tax his mother, tax his wife,
Tax him all throughout his life.
Tax him until he's ninety five,
Tax him until he's no longer alive.
Now he's buried, though, don't yet relax,
You can tax his kids through inheritance tax.

Teach it to your kids - they might be future libertarianism's best hope! :-)

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